Correlation Between ATT and T-Mobile

Can any of the company-specific risk be diversified away by investing in both ATT and T-Mobile at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ATT and T-Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ATT Inc and T Mobile, you can compare the effects of market volatilities on ATT and T-Mobile and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ATT with a short position of T-Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and T-Mobile.

Diversification Opportunities for ATT and T-Mobile

0.47

Correlation Coefficient

ATT  T-Mobile

Very weak diversification

The 3 months correlation between ATT and T-Mobile is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile and ATT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ATT Inc are associated (or correlated) with T-Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of ATT i.e., ATT and T-Mobile go up and down completely randomly.

Pair Corralation between ATT and T-Mobile

Assuming the 90 days trading horizon ATT Inc is expected to under-perform the T-Mobile. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.34 times less risky than T-Mobile. The stock trades about -0.1 of its potential returns per unit of risk. The T Mobile is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  21,390  in T Mobile on October 22, 2024 and sell it today you would lose (145.00) from holding T Mobile or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

ATT Inc  vs.  T Mobile

ATT Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, ATT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

T Mobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, T-Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ATT and T-Mobile

The main advantage of trading using opposite ATT and T-Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, T-Mobile can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in T-Mobile will offset losses from the drop in T-Mobile's long position.

The idea behind ATT Inc and T Mobile pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.